IMF pleads for cash to avert crises

THE INTERNATIONAL Monetary Fund launched an urgent plea for fresh funding yesterday, after warning that resources were near an all-time low following a year of record financial assistance.

The IMF has just $10bn to $12bn in "lendable" resources. To put this in perspective, Russia spent $4bn in a matter of days in a futile attempt to prop up the rouble.

Speaking at the launch of the IMF's 1998 annual report, an official said there was a pressing need for the US House of Representatives to approve an increase in contributions. "The major problem is the lack of action in the House," he said.

The official said the "general feeling" was that the proposed increase would come through. But he added that if the additional contribution failed to materialise, the IMF would have to explore other options, such as entering into bilateral borrowing arrangements with individual governments as it did in the late-1970s and early-1980s.

In the year ending April 1998 - before the latest Fund assistance to Russia - member countries drew nearly $26bn from the IMF's general resources account, nearly four times the level of the previous year.

The IMF said: "The Asian financial crisis that broke out in July 1997 in Thailand, and its subsequent global reverberations, dominated the IMF's work. The crisis prompted a record level of IMF lending in 1997/98, adding immediacy to the need to strengthen the financial resources of the institution to enable it to continue playing a fully effective role."

The unprecedented level of financial assistance given by the IMF over the past year has prompted concerns about what would happen if the so- called "lender of last resort" were to run out of cash itself. An IMF official said the Fund will have about $25bn of uncommitted resources, after the assistance given to Russia. However, the IMF would be unwilling to lend all of this, as it needs some cash to pay back creditors who decide to withdraw their deposits.

The Fund's liquidity ratio is an estimated 29 per cent, meaning that the financial difficulties are on a par, if not worse, than the funding problems experienced in the late 1970s.

In its annual report, the IMF called the Asian crisis "one of the worst in the post-war period". Officials said they expected some trimming of the Fund's global growth predictions in its World Economic Outlook (WEO), due for release at the end of the month, but declined to provide details.

The IMF blamed the Asian crisis on a combination of elements, including a build-up of inflationary pressures, inappropriate exchange rate policies, unhedged external borrowing, lax enforcement of rules and weak supervision.

External factors were also to blame. The IMF said: "Foreign investors under-estimated the risk associated with their search for high yields, and contagion effects of the crisis led to an excessive devaluation of the affected currencies."

At the report launch, an official played down the problem of the so-called "moral hazard" - that is, where a country does not do all it can to solve crises because it knows the IMF will step into help. The issue has concerned members of the US House of Representatives.

But the official said: "We understand the concerns. But from a government's point of view it is not going to adopt policies which are not conducive to economic health."

A scene from the video shows students mock rioting
newsSchool leaver's pic YouTube video features staging of a playground gun massacre
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
ebookA unique anthology of reporting and analysis of a crucial period of history
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star